Xponential Fitness, Inc. (XPOF): A Bull Case Theory
Xponential Fitness (XPOF) is undergoing a strategic turnaround after a turbulent two-year period marked by a short seller attack, senior management overhaul, regulatory scrutiny, and litigation. Despite these challenges, 80% of its revenues continue to come from high-margin, recurring royalties and fees, with minimal capital intensity.
The company's fundamentals have remained resilient, with system sales, same-store sales, and EBITDA consistently growing. Its flagship brand, Club Pilates, is the crown jewel, contributing over 60% of system sales and 70% of profits, supported by a robust franchisee base and strong unit economics.
A new leadership team with a solid operational pedigree has refocused the business on its core strengths and laid the groundwork for sustainable, profitable growth. Temporary headwinds, including legal, restructuring, and interest costs, are expected to ease materially by 2026, significantly boosting free cash flow conversion.
The recent closure of the SEC investigation without action was a key milestone, helping to shed the company's 'uninvestible' stigma and enabling refinancing. At its May 2025 Capital Markets Day, XPOF outlined its growth algorithm targeting mid-to-high single-digit system sales growth, 10% EBITDA growth at 40–45% margins, and levered free cash flow of $100 million by 2027—translating to a 20%+ FCF yield on the current $450 million market cap and $900 million enterprise value.
With historical issues behind it, and shares trading at deep value levels, XPOF is well-positioned for re-rating. If the market fails to recognize this value, the company with a proactive board may become a compelling take-private candidate, as hinted by its CFO.
Previously, we covered a bullish thesis on Xponential Fitness, Inc. (XPOF) by Inflexio Research in March 2025, which highlighted concerns around weak guidance, delayed filings, and brand underperformance. The stock has appreciated ~24% since. The thesis still stands due to Club Pilates' strength. Uzo shares a similar view but emphasizes the turnaround, regulatory resolution, and improving free cash flow.
Xponential Fitness, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held XPOF at the end of the first quarter which was 27 in the previous quarter. While we acknowledge the potential of XPOF as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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